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MAY 04, 1988





Deposit Guaranty National Bank appeals from a judgment of the Circuit Court of Yazoo County in favor of B. N. Simrall & Son, Inc., for $84,639.66 for offsetting funds of a cotton buyer's general business account to apply on an indebtedness due the bank by the cotton buyer, and thereby causing the check by the cotton buyer to Simrall for $84,639.66 to be returned for insufficient funds. We originally reversed the judgment in an opinion rendered April 8, 1987, on the basis of the failure of the proof to establish a" trust fund "or a" special deposit. "

 Because upon reflection I find that the jury received proper instruction and had sufficient evidence to decide that DGB knowingly set off funds belonging to Simrall, I would grant the petition for rehearing and affirm the jury's verdict.


 In the late '70's Holmes & Barrier was a cotton-buying firm operating out of Yazoo City. This business began in 1934 and in the '70's two sons, Jerry B. Barrier and B. J. Barrier III, purchased the firm from their father, thereafter operating as a general partnership under this trade name.

 Barnwell and Hays, Inc., is a close Tennessee corporation with principal offices in Memphis, also engaged in cotton-buying. Its president was Andrew Jackson (Jack) Hays, Jr.

 The record refers to the Barrier firm as Holmes & Barrier, and to Barnwell and Hays, Inc., as Barnwell and Hays; however, due to the similarity of the names, this opinion will refer to Holmes and Barrier as" Barriers, "and the Memphis firm as" Barnwell and Hays. "

 Also in the late '70's these two firms engaged in a joint venture for the purchase and sale of" gin direct "cotton. A group of Mississippi cotton farmers in and around Yazoo County were contacted by the Barriers to sell their cotton under a" gin direct contract. "Several thousand bales of cotton would be

 bought under these contracts. Barnwell and Hays marketed the cotton thus purchased. The advantage of this type of contract to the farmer was the ability to sell his cotton from the gin without having to store it in a compress, thereby avoiding storage charges.

 Typically, the procedures were as follows: In the spring the Barriers contract for the purchase of a certain number of bales of cotton from the farmers at a cotton futures base price, less a point discount. Discount would also be made based upon the grade of cotton. Thus, a farmer entering a contract with the Barriers in March could choose the prevailing futures price for December cotton. The Barriers would agree to pay him at that price when delivered, less a set, agreed-upon discount. The contract was only with the Barriers and the farmer was never told there was another firm involved, or that this was a joint venture. Barnwell and Hays, however, was promptly notified when any contract was executed.

 To hedge against market fluctuations, Barnwell and Hays, upon the execution of such a contract, usually purchased a futures contract to sell a certain number of bales of December cotton.

 When the farmer delivered his bales to the gin in the fall, cotton samples would be taken for classing the cotton and the cotton would be loaded on trucks under bills of lading which showed Barnwell and Hays as the owner and a designated cotton textile mill as the destination.

 When the cotton was delivered to the mill, if the quality was acceptable the mill accepted the cotton and remitted a check to Barnwell and Hays. Occasionally, bales of cotton would be rejected and Barnwell and Hays would have to bear the expense of storing such rejected cotton until sold. Also, upon occasion the ginned cotton had to be stored for a brief period in a local compress.

 Meanwhile, the cotton samples and class cards were sent to Greenwood where U.S. Department of Agriculture employees graded the cotton and wrote the grade on the class cards which were returned to the gin. In the fall of the year this usually took two to three weeks.

 When the farmer got his class cards, he would take them to the Barriers' office in Yazoo City where an employee of the Barriers would work up an invoice showing the sale of the cotton to the Barriers; afterwards, the Barriers would make out a check to the farmer for the bales of cotton based upon the contract price per pound. On that same day the Barriers would notify

 Barnwell and Hays by telephone as to the purchase and the amount to transmit to the Barriers. Barnwell and Hays would then wire the requested amount to the Barriers' bank in Yazoo City to be deposited in the Barriers' general business checking account. The Barriers would request an excess of the amount paid the farmer in order to take care of commissions and U. S. government charges, usually amounting to a little over $2.00 per bale. Occasionally, Barnwell and Hays wired transfers to the Barriers for other purposes, such as the Barriers' share of profits derived from the joint venture. All checks to farmers in payment for cotton purchased under the gin direct contracts were paid out of the Barriers' general business checking account. This same account was used for all business transactions and payment of all business expenses.

 Gin direct cotton contracts amounted to several million dollars yearly business for both of these firms; however, it was by no means all the cotton business engaged in by either of them. The Barriers also bought and sold thousands of bales of cotton in the conventional manner. As a result of these dealings, other cotton merchants also wire transferred funds into the Barriers' general business account.

 In 1981 the local bank in Yazoo City merged with the Deposit Guaranty National Bank of Jackson (" DGB "). The Barriers were shareholders in the local bank and following the merger were also shareholders in DGB. DGB was interested in securing the Barriers' business. They not only wanted their deposits, but, more importantly, wanted to be their prime lender in all their cotton purchases. DGB actively solicited the Barriers' business and subsequently learned about the financial strength of the Barriers individually and of their firm, Holmes and Barrier. DGB also learned the Barriers' monetary needs in purchasing and selling cotton. The written information and discussions between officers of DGB and Jerry Barrier clearly revealed that no bank financing would be required in the gin direct cotton transactions. The Barriers only needed to borrow from DGB for the conventional cotton buying in which the Barriers engaged.


 When DGB determined to solicit the Holmes & Barrier business in 1981, Stan Pratt and Stan Herren, DGB loan officers, made several trips to Yazoo City to find out ...

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